Identifying Inefficient Fossil Fuel Subsidies in Canada

This policy brief by the International Institute for Sustainable Development and Équiterre proposes a four-part framework for the Canadian government to identify and phase out 'inefficient fossil fuel subsidies' to align with climate commitments and the Paris Agreement.

• Canada has made multiple commitments to phase out inefficient fossil fuel subsidies, including a G20 pledge from 2009 and a more recent federal goal to eliminate these subsidies by 2023, moving the deadline up from 2025.
• Substantial fossil fuel subsidies persist in Canada; federal subsidies totaled at least CAD 1.91 billion in 2020, while the provinces of Alberta, British Columbia, Saskatchewan, and Newfoundland and Labrador provided at least CAD 2.5 billion in subsidies during the 2020/2021 fiscal year.
• A primary obstacle to phasing out subsidies is the lack of a shared definition of what constitutes a 'fossil fuel subsidy' or what makes one 'inefficient.' The authors recommend that Canada adopt the World Trade Organization definition, which covers direct transfers, foregone revenue, transfer of risk, and the provision of goods and services.
• The brief proposes four criteria to determine if a subsidy is efficient: alignment with climate commitments, support for a low-carbon economy, consistency with just transition principles, and whether it is the best way to achieve the overall policy goal. A subsidy must meet all four to be considered efficient.
• Subsidies that support new or updated fossil fuel infrastructure or facilitate exports are likely incompatible with net-zero goals. Furthermore, Canada faces significant financial risk from stranded fossil fuel assets, estimated at approximately USD 100 billion.
• The authors argue that subsidies promoting growth in sectors destined to shrink by 2050 violate International Labour Organization (ILO) just transition principles by failing to anticipate employment impacts or provide social protection and skills development.
• While most fossil fuel subsidies are deemed inefficient, the brief notes that small-scale subsidies for remote and northern communities reliant on diesel (totaling CAD 2.37 million in 2020) may serve an important short-term function for energy access, though they should still be phased out over time.

APA

Boisseau-Bouvier, É., & Cameron, L. (2022). Identifying Inefficient Fossil Fuel Subsidies in Canada. International Institute for Sustainable Development. https://www.iisd.org/system/files/2022-07/inefficient-fossil-fuel-subsidies-canada-en.pdf

Chicago

Boisseau-Bouvier, Émile, and Laura Cameron. Identifying Inefficient Fossil Fuel Subsidies in Canada. International Institute for Sustainable Development, 2022. https://www.iisd.org/system/files/2022-07/inefficient-fossil-fuel-subsidies-canada-en.pdf.

Wikipedia

{{cite report |last1=Boisseau-Bouvier |first1=Émile |last2=Cameron |first2=Laura |title=Identifying Inefficient Fossil Fuel Subsidies in Canada |publisher=International Institute for Sustainable Development |date=July 2022 |url=https://www.iisd.org/system/files/2022-07/inefficient-fossil-fuel-subsidies-canada-en.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{boisseaubouvier2022identifying, author = {Boisseau-Bouvier, Émile and Cameron, Laura}, title = {{Identifying Inefficient Fossil Fuel Subsidies in Canada}}, institution = {International Institute for Sustainable Development}, year = {2022}, month = jul, url = {https://www.iisd.org/system/files/2022-07/inefficient-fossil-fuel-subsidies-canada-en.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }